Finance
Burn Rate
The rate at which a company spends cash, typically expressed monthly.
Burn Rate is the rate at which a company spends cash, typically expressed as monthly net cash outflow. Gross burn is total monthly spend; net burn is monthly spend minus monthly revenue. Burn rate combined with cash on hand determines runway — how long the company can operate at current spending levels before running out of money.
Formula
Net Burn Rate = Total Monthly Expenses - Total Monthly Revenue Example
A startup spends $400K/month and generates $50K/month in revenue. Net burn = $350K/month. With $4M in the bank, runway = 11.4 months.
Related terms
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